FROM THE HILL TO THE BRIDGE: The middle class: An economic, not political issue

Written by U.S. Rep. Bill Keating

November 22, 2012

When Congressional agreement on deficit reduction was not reached, a bipartisan compromise for automatically-triggered cuts of $1.2 trillion in the next eight years would begin this Jan. 2. This deficit reduction “sequester” coincides with a number of tax cuts and temporary economic assistance measures expiring at year’s end. Together, this is what’s roughly called the “fiscal cliff.”

We must find a way to replace this “sequester” with a balanced approach to a long-term deficit reduction that focuses on economic growth and job creation and does no harm to our economic recovery in the short run.

While increased revenue from expiring tax cuts coupled with spending cuts might sound like it would help our economy, in actuality, it could potentially trigger another recession as soon as next year. The expiring tax cuts and spending cuts would slash the federal budget by $503 billion next year alone, according to the Congressional Budget Office. Such an extreme cut at a time when our economy is still recovering could be devastating. In order to continue recovering, we need incentives for growth as well as long-term budget reduction measures.

The fiscal cliff has become a “talking point” in the national discussion, but it is not a political issue. It is an economic one. Should we not address the fiscal cliff, our hard-working families and seniors will inevitably feel the burden.

Bipartisan agreement on extending portions of the Bush tax cut to everyone currently exists. The major difference is extending the cut to the marginal amount over $250,000 per year in earnings.

If we don’t extend the Bush tax cuts for the middle class, it will affect 1.3 percent of our gross domestic product and cost approximately 1.6 million jobs. On the other hand, allowing the tax cut for the marginal amount over $250,000 to expire only affects only .1 percent of the Gross Domestic Product. To put this in perspective, a 1 percet difference in our gross domestic product translates to approximately $3 trillion in our country’s revenue.

It is absolutely imperative that we extend the Bush tax cuts for our middle-class families. But we must also support a long-term deficit reduction plan that does not force sequestration. The across-the-board sequestration cuts would affect the agencies and organizations that form the very core of our country’s basic services, an impact that would affect every single one of us.